The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition.
CO2 emissions are the main driver of global warming, and have increased to record highs. In 2022, following a short-lived dip at the height of the COVID-19 pandemic, global CO2 emissions reached 36.8 gigatons (Gt).1 Emissions increased by an additional 1.1 percent in 2023, largely due to the economic rebound and a further increase in fossil fuel consumption, with the energy crisis and high natural gas and liquefied natural gas (LNG) prices in 2022 triggering an increased use of unabated coal as a cheaper but more emissive fuel.2
About the Global Energy Perspective 2023
The increase in global temperatures caused by elevated atmospheric CO2 levels is already being felt. In the second half of 2023, the global average temperature exceeded the 1.5°C threshold for 182 of the 184 days between July 1 and January 1, with 2023’s “short-term El Niño influenced” global warming already at 1.48°C compared to pre-industrial levels.3 In all our bottom-up energy transition scenarios, average warming (excluding potential short-term effects such as this year’s El Niño) would reach 1.5°C before 2035, in line with IPCC expectations.4 This could cause significant impacts, including increasingly extreme weather conditions and disruption to countries and economies around the globe.
Given the fact that global temperatures would increase beyond the 1.5°C threshold in all our bottom-up models, there is an urgent need to further increase efforts in both mitigation and adaption to minimize further temperature increases. The UAE Consensus, delivered at COP28 in December 2023, acknowledges that limiting global warming to 1.5°C with no or limited overshoot requires deep, rapid, and sustained reductions in global greenhouse gas emissions of 43 percent by 2030 and 60 percent by 2035 relative to the 2019 level to reach net-zero carbon dioxide emissions by 2050.5 Progress in curtailing emissions is being made—in all our energy transition scenarios, global carbon dioxide emissions begin to decline before 2025, driven largely by the replacement of coal power by renewables and natural gas, along with other changes to the emissions trajectories of major emitters.
CO2 emissions have continued to rise, largely driven by coal
After a drop in CO2 emissions in 2020 due to the effects of the COVID-19 pandemic, the upward trajectory of global CO2 emissions resumed. In 2022, global energy-related CO2 emissions (including emissions from energy generation as well as energy-related industrial processes) reached 36.8 Gt, the highest level ever recorded. Compared to 2019 emissions, 2022 emissions were 0.6 Gt higher, and the latest estimates for the full year 2023 are 0.4 Gt higher than 2022 levels.
This is largely driven by an increase in coal emissions in emerging economies, which contributed 80 percent to overall growth in coal consumption between 2021 and 2022. China alone contributed 50 percent to the rise of coal-related emissions in 2022, with India and Indonesia both contributing 15 percent.
Emissions from other fossil fuels (oil and gas) were affected by several factors, including the COVID-19 pandemic and the energy crisis, and, in aggregate, these effects offset each other, resulting in oil and gas emissions in aggregate remaining largely the same between 2019 and 2023. Specifically, oil demand dropped by 12 percent in 2020 due to the pandemic, but demand increased by 10 percent until 2022. Mature economies accounted for 30 percent of the increase in oil-related emissions in 2022 compared to 2021, mostly due to increased demand in the transport sector. Other drivers of oil demand were Africa and the Middle East, which accounted for 30 percent of the increase from 2021 to 2022. Nevertheless, oil-related demand and emissions in 2022 remained below 2019 levels, only being expected to rebound above 2019 levels in 2023.
For natural gas, the decrease in demand due to COVID-19 was lower than that for other fuels, and demand increased above 2019 levels in 2021. However, between 2021 and 2022, demand decreased, largely driven by the energy crisis that followed the Russian invasion of Ukraine and the associated price increases that resulted in local average prices increasing by up to tenfold compared to previous years. Europe was the largest contributor to the overall decline in natural gas consumption, accounting for 50 percent of the decrease, but Asia and Latin America also contributed, each accounting for 25 percent.
Recent years have seen a marked difference in fossil-fuel usage trends between mature and emerging economies. Due to high gas prices and concerns about energy security, coal consumption increased in many emerging economies, while, despite some short-term deviations from the trend, coal consumption continued to decline in many mature economies, decreasing by 0.25 Gt between 2019 and 2022. However, despite a decrease due to COVID-19, oil consumption in mature economies has increased to above 2019 levels.
A large proportion of global emissions are covered by net-zero commitments and emissions trading systems
Progress in curtailing rising emissions is being made. The number of countries committed to achieving net zero emissions has been slowly but steadily increasing. Today, around 80 percent of global CO2 emissions is covered by net-zero commitments in 72 countries, with 70 more at least considering net-zero commitments.
Several major policy packages have been introduced in the past 18 months that aim to move countries toward being aligned with the Paris Agreement, including the Inflation Reduction Act in the United States, the European Green Deal Industrial Plan in the European Union, China’s 14th five-year plan, and Japan’s Green Transformation Plan, which commit $415 billion, €285 billion, $280 billion and $113 billion to decarbonization, respectively. These industrial support packages tend to be concentrated in large, mature economies.1
Additionally, an increasing number of countries have introduced emissions trading system (ETS) mechanisms. Today, 25 percent of emissions are covered by an ETS system, with varying price levels. Although the CO2 prices these impose are not always enough to fully decarbonize, the installment of a pricing mechanism is seen as a necessary first step.
In addition to CO2, there has also been progress in mitigating other greenhouse gases, particularly methane. For example, the Oil and Gas Decarbonization Charter (OGDC), launched in December 2023 at COP28, commits signatories to achieving net-zero operations by 2050 across Scope 1 & 2 emissions, near-zero methane in upstream operations by 2030, and zero routine flaring by 2030.2
However, after the recent energy crisis, there is also increased awareness of bottlenecks in manufacturing, labor, investments, material availability, affordability, and land availability that could slow down the energy transition. Furthermore, the evolution of capital markets has led to high valuations for energy companies with fossil fuel-focused strategies, driven by four- to sixfold higher profits in 2022 compared to the pre-COVID-19 average between 2017 and 2019.3 At the same time, renewable energy players’ profits are under pressure due to the difficult post-pandemic environment, including material inflation and capital cost increases. 2024 will likely be a crucial year to see if further policy interventions and corporate investment decisions can help maintain and build out the momentum of the transition.
Across scenarios, CO2 emissions would begin to decline by 2025
Thanks in part to these global efforts to control emissions, CO2 emissions are projected to begin to decline by as early as 2025. Compared with the growth trajectories for CO2 emissions between 2014 and 2019, our scenarios show several trend-breaks for the coming five years that, in aggregate, lead to a peak in emissions before 2025 followed by a decline. This peak in emissions does not necessarily imply a decrease in activity, utility, or energy demand. Across modeled scenarios, the economic growth level is not varied—what changes is how the necessary energy is supplied.
Specifically, power-related coal emissions in China are projected to decrease by between 150 and 300 terawatt hours (TWh) by 2025. This is driven by the large increase in solar power in the country’s energy mix—solar capacity additions tripled from 2019 to 2022 (from 40 to 130 GW) and are expected to continue to increase (to 200 GW in 2025). In mature economies, such as the European Union and the United States, the largest driver for decreased emissions is the electrification of road transport, with global sales of electric vehicles (EVs) growing to 14 percent of new vehicles sold in 2022, up from 2.6 percent in 2019, with EVs projected to account for between 20 and 35 percent of new passenger vehicle sales in these regions by 2025.1
Nevertheless, our energy transition scenarios estimate a decarbonization gap of around 14 to 17 Gt CO2 in 2030 that needs to be bridged to reach a 1.5° pathway. A step-change of speed in decarbonization is required in industry, power, and buildings to achieve that pathway, or even achieve countries’ current commitments.
The projected post-2025 decline in emissions is driven by several major sectors and geographies
By comparing the historical emissions trajectories of several major sectors and geographies from 2014 to 2019 with emissions from 2022 to 2027 (modeled under the Further Acceleration scenario), key drivers of the decline in emissions post 2025 can be identified.
Globally, road transport is one of the main drivers curbing the emissions trajectory, driven by increases in EV sales in China (38 percent of new vehicle sales in 2023) and the European Union (26 percent of sales), with the recent Inflation Reduction Act expected to increase the incentives for consumers and manufacturers for EVs in the United States as well. As such, while 81 megatons (Mt) of the total growth in emissions in 2014-19 came from road transport, going forward we project the growth to be only 6 Mt.
Industrial sectors like chemicals, iron and steel, and power would see sharp declines in their emissions trajectories, especially in China, where power sector emissions are projected to decline as renewables show a further accelerated growth, and a drop in construction activity leads to lower emissions in iron and steel and cement.1 Globally, the change in power sector emissions is driven by an uptake of renewables, as new installations of around 500 GW per year (2023 value) continue to decrease the use of coal in power in mature or maturing economies. However, this shift in power is largely offset by increasing power demand in emerging economies due to growing populations and concerns about energy security, leading to more use of fossil fuels. Another factor is the increase in the speed of industrial electrification in mature economies, where increasing carbon prices are pushing a shift from fossil fuels to electricity.
In buildings, increased heating and cooling end-use demand from emerging economies (driven by growing populations and increasing energy demand per capita) would be offset by decreased heating demand in mature economies due to projected rising temperatures, along with increases in electrification and efficiency.
Emissions in aviation and maritime would continue to grow as demand increases across the globe and affordable decarbonization options remain limited, leading to projected increase in emissions of 0.6 Gt CO2 by 2027.
By geography, trends in China would be major drivers in reducing emissions post 2025, since projected increases and decreases in other geographies largely offset each other, leading to a net change of roughly zero. The reduction in emissions in China in our scenarios is mainly driven by power and industry due to strong uptake of renewables and reduction in coal use, as well as a projected decline in building in the country.
Average warming would exceed 1.5°C by 2035 in all scenarios
Despite the projected change in the trajectory of emissions, implied levels of global warming give reason for continued concern. In all scenarios, the average warming caused by cumulative CO2 emissions would reach 1.5°C above pre-industrial levels by 2035, even if all climate commitments are achieved, as modeled in the Achieved Commitments scenario. Only in the 1.5° scenario would that number not be exceeded, which would require accelerated decarbonization.
Climate outcomes among our bottom-up energy scenarios begin to differ significantly around 2040. Overall, there is a wide range of uncertainty in estimates of average temperature increase due to significant uncertainty caused by climate feedback loops.1 Nevertheless, under the Fading Momentum scenario, there is a 50 percent chance that average warming exceeds 2°C before 2050, and 3°C before 2100.
Due to rising temperatures, adaptation efforts will likely be required regardless of the speed of the energy transition
The global climate is likely to continue warming in the short term, and, as a result, unpredictable weather patterns could become more intense and more frequent. In addition, exceeding temperatures above 1.5°C makes it more likely that climate feedback loops, such as the collapse of Greenland glacier and the dieback of the Amazon rainforest, are activated. Such feedback loops would increase greenhouse gas emissions even more rapidly, and could lead to additional warming. These events could result in large-scale loss of natural and economic value and would also further accelerate the impact of global warming.
As such, climate risk and uncertainty need to be better understood and incorporated into decision making, as tail risks could have outsized impacts on specific industries and regions. Since over half of nature mitigation abatement does not generate a return yet, the onus is expected to be on countries to incentivize mitigation practices.1
Despite a significant trend-break in the global emissions trajectory, our projections show that, without urgent action, there is still a high likelihood that the world will experience warming of over 1.5°C. This, along with the growing likelihood of larger-scale negative impacts of global warming , emphasize the urgency to accelerate efforts to reduce emissions and mitigate climate change, along with the need to prepare for additional avoidance measures and to mitigate the consequences of a changing climate with adaptation and climate risk premiums.
Climate adaptation is a fast-growing field today, with 128 countries, covering around 60 percent of the world’s population, having national adaptation plans. However, for 70 percent of the countries with plans in place, these are still at a high level of abstraction (for example, they are still missing a cost assessment). Moreover, investment requirements tend to be significant; of these countries that have assessed plans, the investments can already run up to 5 percent of GDP in emerging economies, with climate adaptation measures in the future likely to require a larger share of GDP as climate change effects compound. At the same time, creative applications of climate mitigation strategies can help to create jobs and economic value for communities while mitigating their risk of the impacts of global warming.6
Advancing climate adaptation may need to occur alongside concerted global efforts to reduce greenhouse gas emissions. The opportunities this creates should be captured proactively, as vulnerable groups and the planet at large have much to gain.
To request access to the data and analytics related to our CO2 outlook, or to speak to our team, please contact us.